The Espoo, Finland-based company, has recorded declines in the average selling price of its handsets for the last six quarters and has stepped up its efforts in recent years to find new revenue streams, launching services such as music download store Ovi and buying mobile navigation company Navteq in July last year.

The company remains the dominant producer of mobile phones with a 38% share of the global market, although it has faced increased competition for high-end phones from Apple Inc.'s (AAPL) iPhone, and Research in Motion Ltd.'s (RIMM) Blackberry. It has also ceded market share to Asian rivals such as Samsung Electronics Co. Ltd (SSNHY), which already makes both PCs and mobile phones. Meanwhile, companies such as Taiwan's Acer Inc. (2353.TW), the third-largest PC-maker by shipments, in February launched its first lineup of smartphones.

The move highlights increased consumer demand for products that fuse portable computing, telecommunications and music listening technology, and marks a significant strategic move, said Ranjit Atwal, principal research analyst for the PC industry at Gartner Inc.

"It's not going to be a huge compared with its mobile portfolio, but strategically it's where devices are headed," with the convergence of PC-like functions together with the ability to communicate. He added the key task will be how it will differentiate its offering from rivals.

Around 2.5 million netbooks were sold in Europe last quarter, according to Gartner figures.

"A growing number of people want the computing power of a personal computer with the full benefits of mobility," said Kai Oistamo, Nokia's Executive Vice President for Devices, in a statement.

"We are in the business of connecting people and the Nokia Booklet 3G is a natural evolution for us."

Nokia declined to comment on pricing, availability or detailed specifications of the device ahead of a media event Sept. 2. "It looks a more premium device than low end," said Gartner research director for mobile Carolina Milanesi, noting that operators also want to improve data revenue though it remains to be seen how the device will be marketed and what sort of subsidies may be available.

That the device will be based on Windows is a positive, as there had been some concern that it would use the "aging" Symbian platform, said FIM analyst Michael Schroder in Helsinki, but he cautioned that Nokia "will enter head to head with strong competitors in a tough market."

Nokia's net profit was EUR380 million for the three months to June 30, down 66% from EUR1.10 billion a year earlier on sales of EUR9.91 billion, down from EUR13.15 billion.

At 1325 GMT, Nokia shares were trading up 1.4% at EUR8.89 while the broader Helsinki market was up 1.6%. The stock has lost more than 20% of its value in the past three months on concerns over consumer spending amid the recession.